Investment is a tool to secure the uncertainties that may occur in the future. Some of the prominent investment options available in India are Public Provident Fund (PPF), Mutual Funds, Unit Linked Insurance Plans (ULIPs), Senior Citizen Savings Scheme (SCSS), Fixed Deposit, and much more.
From all the investment options available in the market, Fixed Deposit (FD) is accepted to be one of the most secure investments offering high investment returns compared to all other investment options. In an FD, you need to deposit a lump sum of money for a pre-defined tenor and earn interest rates for the same. The FD interest rates are calculated on the basis of the power of compounding. The more your tenor is, higher will be your investment returns. Also, your returns depend on the amount you deposit and the frequency of interest rates payout.
There are two types of FD investment, they are:
- Cumulative FD
A cumulative FD is a type of Fixed Deposit wherein the interest rates are paid out annually or at the time of maturity. Cumulative FDs aid in building a sizeable corpus for the retirement years.
- Non-Cumulative FD
A non-cumulative FD is a type of Fixed Deposit wherein the interest rates are paid out in a monthly, quarterly, half-yearly, or yearly basis as per your preference. This type of FD will be best for pensioners who seek regular income after retirement. Both types of FDs offer high returns as compared to the standard savings account. However, cumulative FD earns higher interest rates as compared to non-cumulative FD.
How is Fixed Deposit a Smart Investment Choice for Indian Clients?
The main motive of investment is to earn assured higher yields. Unlike the market-linked investment options, FD’s offer guaranteed returns from investment. You can quickly open an FD account from conventional banks as well as Non-Banking Financial Companies (NBFCs). Also, the application procedure is now available in online medium through the website of the financial provider. The online application procedure not only eases the entire procedure but also reduces the paperwork and other documentation. All you need to do is to submit a duly filled application form including the type of customer, deposit amount, the frequency of interest payout, and the tenor of the FD. Next, you need to submit a few necessary documents like the KYC documents. Moreover, if you invest in leading Non-Banking Financial Companies, you can avail the following benefits:
- Guaranteed returns from the investment without the influence of market fluctuations.
- Quick online application and renewal procedure from the website.
- The choice between cumulative and non-cumulative FD
- Flexibility in choosing the tenor with a minimum deposit as low as Rs. 2500.
- Facility to avail loan against FD wherein you can use over 90% of the accrued sum.
- High FD interest rates varying from 8.75% to 9.10% based on the type of customer, type of FD, and the FD tenor.
- Availability of online FD calculator that helps in calculating the maturity amount as well as the applicable interest rates.
- Online management of FD account with the portal.
- 24/7 customer care assistance
- Facility to open multiple FDs at the same time with different tenors for FD laddering.
- Option to take loan against FD wherein you can use up to 90% of the accrued funds.
- High stability in investment returns with CRISIL’s FAAA and ICRA’s MAAA high credit rating.
Tax Benefits available with investment in FD:-
As per section 80C of the Indian Income Tax laws, a person can claim up to Rs 1.5 lakhs as tax rebate while filing their ITR if they invest that sum in any investment scheme. Accordingly, investment in FDs qualify as deduction under section 80C. Besides, the Indian banking and finance sector has an FD scheme known as TX saver FD dedicated for this purpose.
The tax-saver FD scheme allows people to invest up to Rs 1.5 lakh for a fixed period of 5 years and claim tax rebate. That said, investment in this FD can’t be liquified before the actual maturity period: no partial withdrawal allowed.
TDS deduction applicable on FD
Tax benefits under section 80C are different from TDS deduction. TDS deduction applies on any and every income a person is entitled with. Therefore, the same shall be levied on interest income generated through FD investment if the amount is more than TDS-exemption limit of Rs 10, 000 a year. In case of senior citizens, the limit is Rs 50,000 per year. Also, bank or NBFC will deduct 10% of the income generated if the PAN details are available with them, 20% if PAN details are missing.
With such attractive benefits, investing in an FD can be a smart choice to grow your savings efficiently without any hassles. You can check your eligibility from the website to avoid any rejections in the future. You can also compare the interest rates of FD investment offered by different financial providers and choose the one that offers the best. However, you must make sure to check the credibility of the financial provider before choosing to eliminate the risks of losing your money. It is ideal to opt for financial companies that are accredited with AAA or at the least AA rating from credit rating companies. Investing in companies below that rating would be risky, and the chance of losing your invested money would be higher.
